Harley-davidson, Inc. · NYSE:HOG
Harley-davidson — Q1 2020 Earnings Presentation
25 slides from Harley-davidson's earnings presentation, Apr 28, 2020
Slide 1: 2020 First Quarter Update
HARLEY DAVIDSON’ HARLEY-DAVIDSON, INC. 2020 FIRST QUARTER UPDATE APRIL 28, 2020
Slide 2: Conference call presenters and forward-looking statements
HARLEY — 2020 FIRST QUARTER UPDATE Re DAVIDSON’ THIS PRESENTATION SUPPORTS THE AUDIO CONFERENCE CALL CONFERENCE CALL PRESENTERS = Introduction Shannon Burns, Director, Investor Relations = Business Perspectives Jochen Zeitz, Chairman and Acting President and CEO " Financial Results John Olin, Senior
Slide 3: COVID-19 precautions, liquidity and cash preservation
HARLEY DAVIDSON’ Precautions - Global travel and visitor restrictions Enhanced cleaning and sanitation - all sites Museum closed, no April/May consumer events - Comprehensive return to workplace protocol Complying with government efforts to manage virus spread - Salaried employees working from home
Slide 4: Community Strength
HARLEY — COMMUNITY STRENGTH RL DAVIDSON’ UNITED soo seve ma a WE WILL DONATIONS APPS RIDE FOOD LIVEWIRE™ DRIVES AUCTION * Helping riders made a difference in their communities - CONNECTING THE H-D COMMUNITY WITH COVID- promoting opportunities and utilizing help apps to connect 19 RELIEF EFFORTS ride
Slide 5: The Rewire
— THE REWIRE aay DAVIDSON’ Rewire the company’s priorities, execution and operating model, leading to a new 5-year strategic plan THE REWIRE PLAYBOOK - Key elements 1. Enhance core strengths, better balance expansion into new spaces 2. Prioritize markets that matter Reset product launches and produc
Slide 6: Q1 2020 vs. Q1 2019 Results
— Q1 2020 VS. Q1 2019 RESULTS HARLEY DAVIDSON’ REVENUE NET INCOME EPS $1.30 $69.7 $0.45 a Y yY (6.2)% (45.5)% (43.8)% Q1 earnings impacted by: = Motorcycles segment operating income down 22.0% — Revenue down 8.0% on 10.0% lower shipments — Gross margin 29.0%, down 0.1 pts. — SG&A up $8.9 million — R
Slide 7: Worldwide Retail Sales
— WORLDWIDE RETAIL SALES (Motorcycles} Q1‘20 Worldwide 40,439 U.S. 23,732 International 16,707 vs. PY (17.7)% (15.5)% (20.7)% Source: Dealer reported data = U.S. retail sales down — Through mid-March, U.S. retail sales were tracking to one of H-D’s strongest quarterly performances of the last 6 year
Slide 8: U.S. Retail Sales
— U.S. RETAIL SALES HARLEY DAVIDSON’ H-D U.S. NEW RETAIL MOTORCYCLE SALES (4.2)% (15.5)% 3 e § 8 3 3° 2 = 3 2 re S$ g 2 8 = qQi'19 Qi ‘20 Q1 2020 retail sales very strong thru mid-March — Q1QTD retail sales peaked in mid-March at 6.6% growth due to stronger dealer efforts and new product introductio
Slide 9: International Retail Sales
HARLEY INTERNATIONAL RETAIL SALES — DAVIDSON’ H-D INTERNATIONAL NEW RETAIL MOTORCYCLE SALES vs. prior year qi International (20.7)% = EMEA (28.4)% Significant declines across region due to COVID-19 " Asia Pacific (5.3)% Growth in Japan, offset by China and S. Korea RETAIL SALES = Latin America (21.5
Slide 10: Shipments & Mix
— SHIPMENTS & MIX HARLEY DAVIDSON’ SHIPMENTS MOTORCYCLES SEGMENT Q1'20 vs. PY Total 52,973 (10.0)% Touring 40.8% (1.7) pts. Cruiser* 38.0% 3.3 pts. Street / 21.2% — (1.5) pts. Sportster® 100.0% * Includes Softail®, CVO™ and LiveWire™ = Q1 shipments down 5,918 motorcycles year-over-year as global man
Slide 11: Revenue
— REVENUE REVENUE MOTORCYCLES SEGMENT ($ millions) Q1‘20 vs. PY Motorcycle $899.4 (6.8}% P&A 134.7 (15.7}% General Merchandise 49.2 (11.3)% Licensing 8.0 (6.4)% Other 8.5 15.8% Total Revenue $1,099.8 = (8.0)% = Q1 revenue down 8.0% on 10.0% lower shipments = Q1 average motorcycle revenue per bike wa
Slide 12: Gross Margin
— GROSS MARGIN Q1 gross margin % of revenue impacted by: Mix - unfavorable motorcycle family and parts and accessories mix HARLEY DAVIDSON’ GROSS MARGIN MOTORCYCLES SEGMENT ($ millions] Qi 2019 Gross Margin $347.4 % of revenue 29.1% - Volume (34.9) - Pricing net of cost 3.5 - Mix (3.4) - Currency (1
Slide 13: Operating Margin
— OPERATING MARGIN HARLEY DAVIDSON’ OPERATING MARGIN MOTORCYCLES SEGMENT ($ millions) Qi 2019 Operating Income $108.4 % of revenue 9.1% - Gross Margin (28.5) - SG&A (8.9) - Restructuring 13.6 2020 Operating Income $84.6 % of revenue 7.7% = Q1 operating margin was unfavorable behind lower gross margi
Slide 14: Financial Services Segment
— FINANCIAL SERVICES SEGMENT “ee DAVIDSON’ OPERATING INCOME FINANCIAL SERVICES SEGMENT ($ millions) Qi 2019 Operating Income $58.7 - Net interest income 10.0 - Provision for retail motorcycle loan losses (37.6) - Provision for wholesale loan losses (7.3) - Operating expenses (0.4) - All other (0.5)
Slide 15: Financial Services Segment: HDFS Operations and Liquidity
April 28, 2020 SS Conference Call Slide Presentation — FINANCIAL SERVICES SEGMENT er DAVIDSON’ HDFS OPERATIONS AND LIQUIDITY OPERATIONS LIQUIDITY oe . ($ millions) Originations End of Q1 2020 New and used H-D retail motorcycle loans . ; Cash & equivalents $1,049.5 Q1 $611.1M (10.8]% vs. Q1'19 . . Ap
Slide 16: HDFS Retail Motorcycle Loan Performance
HARLEY — FINANCIAL SERVICES SEGMENT RE DAVIDSON’ HDFS RETAIL MOTORCYCLE LOAN PERFORMANCE 4.78% 4.89% Q1 30+ Day Delinquencies 5% 4 4.57% 4,089 0, 4 “% 3.37% 3% 4 2.66% 2.64% 288% 2% T T T T T T T T T T T T T 1 ‘07 «08 09 10 "11 121381415 16171819 *20 Annualized Q1 Loss Experience 4% + 3% 4 2.73% 2.2
Slide 17: Harley-Davidson, Inc. 2020 results vs. prior year
— HARLEY-DAVIDSON, INC. 2020 HARLEY-DAVIDSON, INC. vs. Prior Year Cash & marketable securities - $1.47 billion vs. $759.6 million Operating cash flow - $[8.6) million vs. $32.7 million Capital expenditures - $32.9 million vs. $35.3 million Depreciation & amortization expense - $47.4 million vs. $64.
Slide 18: Cash Generation/Returns
HARLEY CASH GENERATION/RETURNS — DAVIDSON’ Harley-Davidson leads in cash generation and consistently returned cash to shareholders (2017-2019) 3-Yr. Avg. Free Cash Flow Conversion!")(2) 3-Yr. Avg. Free Cash Flow Margin'!2) 167% 15% 143% 12% HOG Mtrcycl Pwrsprts Mfg Cons HOG Mtrcycl Pwrsprts Mfg Cons
Slide 19: Shareholder Returns
HARLEY — SHAREHOLDER RETURNS RE DAVIDSON’ DIVIDEN SHARE REPURCHASES Q1 Dividends Per Share Q1 Discretionary Share Repurchases $0.40 $80 $0.20 5 $40 $0.0 $0.00 0) Qi'19 Q1'20 qQi'19 Q1'20 Q1 dividend of $0.38 per share Suspended share repurchase program in Q1 2020 "Board of Directors approved a $0.02
Slide 20: Guidance: 2020 Expectations
— GUIDANCE HARLEY DAVIDSON’ 2020 EXPECTATIONS Revenue Motorcycles and Gross margin % Related Products segment SG&A Operating margin % Financial Services segment Operating income April 28, 2020 SS Conference Call Slide Presentation 20
Slide 21: Focused investments, strong long-term returns
Focused investments, strong long-term returns 21
Slide 22: Non-GAAP Measures
HARLEY — NON-GAAP MEASURES = DAVIDSON’ This presentation includes financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP) and are therefore referred to as non-GAAP financial measures. The non-GAAP measures listed below are intended to
Slide 23: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO NON-GAAP AMOUNTS HARLEY DAVIDSON’ This slide contains non-GAAP measures related to net income and diluted earnings per share that exclude restructuring plan costs and the impact of recent EU and China tariffs. Reconciliations of GAAP amounts to non-GAAP amounts are included
Slide 24: Reconciliation of GAAP to Non-GAAP Amounts
RECONCILIATION OF GAAP TO HARLEY NON-GAAP AMOUNTS DAVIDSON’ This presentation contains performance measures calculated using non-GAAP amounts as inputs. These performance measures include: “3-yr. Avg. Free Cash Flow Conversion", “3-yr. Avg. Free Cash Flow Margin”, “3-Yr. Avg. ROIC and ROE”. Reconcil
Slide 25: Forward-Looking Statements
HARLEY — FORWARD-LOOKING STATEMENTS RE DAVIDSON’ Cautionary Note Regarding Forward-Looking Statements The company intends that certain matters discussed in this press release are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities